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(a) Given Px = Rs 2, Py= Rs 1, income = Rs 12. Find how a consumer spends her income in order to maximize total utility.(b) Calculate TU receive by the consumer. Show that the equilibrium condition for the consumer are satisfied. |
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Answer» (a) Consumer will spend 1st and 2nd rupe to buy 1st and 2nd units of Y. This will give total of U units. If the 1st two rupees were spent on 1st unit of X then 16 units would be received. (b) TU = 93 units (c) MUx/ Px = MUy/ Py subject to PxX + PyY = M 12/2 = 6/1…. subject to (2)(3) + (1) (6) = 12 |
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